Avalonbay - AVB - close: 72.00 change: +0.98 stop: 67.49
A triple-digit bounce in the Industrials helped AVB breakout from last week's trading range. The stock has already retested the $70.00 level and its 100-dma as support. Friday's gain put AVB at a new three-month high over the February peak. Now shares look poised to make a run higher. Our target remains the $75-76 range. We would consider new bullish positions based on AVB's relative strength but keep a close eye on the major averages. If there is no follow through on Friday's bounce next week it may be prudent to shy away from bullish plays.
BUY CALL JUL 65.00 AVB-GM OI= 761 current ask $8.40
on April 24 at $ 70.05
Golden West Fincl - GDW - close: 62.33 chg: +0.07 stop: 59.95
Both the BKX and BIX banking indices turned in decent gains on Friday. If the rally continues then both banking indices could produce a bullish breakout from their current descending channels. Yet therein lies the challenge. The sector remains oversold from its highs but is facing tough resistance overhead. Fortunately, GDW has shown a lot of relative strength compared to many of its peers. GDW has also produced what looks like a short-term bottom over the last couple of months. The stock dipped to $61.50 near its 10 and 100-dma's on Friday and traders bought the dip suggesting this is a new bullish entry point. We would consider new bullish positions here but ONLY if the major averages can produce a follow through on Friday's bounce. More conservative traders may want to wait until after the Tuesday FOMC meeting before considering any new positions. Our target is the $66.50 level.
BUY CALL JUN 60.00 GDW-FL OI=208 current ask $3.80
Picked on April 26 at $ 62.55
Nucor - NUE - close: 51.10 chg: +1.33 stop: 49.95
Our NUE play remains in limbo. The stock has slipped back toward support near $50.00 and its 200-dma's. Shares remain short-term oversold and in a two-month downtrend but they are near support for NUE's longer-term up trend. Prudential reiterated its under perform rating on NUE this past Friday and a Reuters article, also out on Friday, described a slow down or a soft spot for steel prices recently. NUE should have traded lower. Thus we believe that Friday's bounce is probably just that an oversold bounce. However, since there is the possibility of the Industrials bouncing from the 10,000 level then NUE could bounce from the $50 level. We will keep NUE on the play list but we remain on the sidelines. Our current trigger to go long is at $55.05. However, we might adjust our entry to over the 21-dma if conditions change. Alternatively, if the market continues to sink and NUE trades under $49.00 we may switch to bearish positions.
Picked on April xx at $ xx.xx <-- see
Websense - WBSN - close: 53.05 chg: +1.46 stop: 49.49
The good news here is that Friday's 2.8 percent gain completely erased Thursday's decline. The "bad" news is that WBSN is still stuck under its 40-dma. Overall the picture remains the same. WBSN is bouncing from the bottom of its wide rising channel with price support near $48.00 bolstered by its 200-dma. A similar pattern is seen on its P&F chart with investors buying the dips to its long-term trendline of support. We remain bullish but if the broader market indices fail to mount any sort of sustainable rally next week then WBSN's own rally is likely to stall. Traders can choose to go long at current levels or hope for a dip back toward the $50.50-51.00 region. Momentum traders can wait for a breakout over $54.00 as a new entry point. Our target is the $59.00-60.00 range.
BUY CALL JUL 50.00 DQH-GJ OI= 89 current ask $6.90
Picked on April 27 at $ 52.85
Adobe Systems - ADBE - close: 59.47 chg: +1.00 stop: 61.01 *new*
We initially added ADBE as a short-term put candidate on April 26th. The stock had "filled the gap" from its mid-April drop and shares were producing a failed rally near resistance at the top of the gap. The short-term trend still looks weak but Friday's bounce was a bit unexpected. The stock remains under resistance at the $60.00 level and $60.75. The GSO software index remains in a bearish trend but could bounce another day or two before turning lower. The same could be said for ADBE. Readers may want to wait a day or so to see if the $60.00 level holds before considering new bearish positions. We're going to lower our stop loss to $61.01. Our short-term target is still the $55.00 level.
Picked on April 26 at $ 59.12
CDW Corp - CDWC - close: 54.69 chg: +0.83 stop: 58.01
CDWC is showing a little volatility. The stock gapped higher on Friday morning after the company's management tried to bolster their stock price. The company said they had increased their stock buy back program by an additional three million shares on top of the 1.5 million share program already in effect. The initial strength on Friday did not hold and the stock sank to another two-week low before the afternoon market buy programs kicked in. We remain bearish on CDWC. However, readers may want to stand back and look for a bounce back toward the $56.00 level. A failed rally near $56.00 could be used as a new bearish entry point. Our target remains the $50.00 region.
BUY PUT JUL 60.00 DWQ-SL OI=1682 current ask $6.10
Picked on April 24 at $ 55.68
Infosys Tech. - INFY - close: 59.20 chg: +1.72 stop: 62.51
Nothing moves in a straight line so it's not surprising that INFY produced an oversold bounce on Friday, especially with the major averages in positive territory. The question is where will the bounce fail. INFY's eighteen-month bullish trend appears to have been broken. The recent earnings warning for 2006 does not inspire investor confidence and the GSO software index remains in a bearish pattern. Furthermore INFY's P&F chart has reversed from a buy signal to a sell signal with a $49 target. Here's our suggestion. Wait and watch for INFY to bounce back toward the $60.00 or even $61.00. A failed rally at either level could be used as a new bearish entry point but be sure that INFY is rolling over. Just to play it safe if INFY hits either level look for a $1.00 drop (in this case back under $59.00 or back under $60.00, respectively) before initiating new bearish positions. Our target is the $51-50 range. Our time frame is six-to-eight weeks.
PUT JUN 65.00 IUN-RM OI= 50 current ask $9.00
Picked on April 26 at $ 58.24
Lehman Brothers - LEH - close: 91.72 chg: +0.09 stop: 94.05 *new*
Heads up! Our put play in LEH has been triggered. The stock was weak on Friday morning before the afternoon buy programs sent the market bouncing back. The low for the day was $89.45, which was exactly our trigger point. Coincidence? We suspect that both LEH and the XBD broker-dealer index could rally another day, maybe two, before continuing lower. That means we need to give LEH a little more room than we have now with our stop loss at $92.51. We hate to do it but to give this play a chance we need to adjust our stop loss to $94.05. The $94 level has been resistance this past week so it's a good spot to stick our stop loss. More aggressive traders may actually want to stick their stop above the $95.00 level. If you look at the chart below you'll see the short-term trend of lower highs. Yet another alternative would be for any trader who did enter bearish plays on Friday's dip to consider exiting now and then re-entering positions once we see where the bounce fails. We suspect it will be near $94 but it could be near the $95 level. We'll be watching for the failed rally and alert you to any new entry points. We will be adjusting our target to the $86-85 level.
Picked on April 29 at $ 89.45
Marriot - MAR - close: 62.75 chg: -0.62 stop: 66.11
MAR is a new bearish play from the Thursday night newsletter. Friday's session saw shares lose another 0.97 percent on strong volume. There is no change in our strategy. A reprint of Thursday's play description follows here:
We like MAR as a bearish candidate because the bullish up trend has been broken. Shares of MAR were very strong for months but the stock peaked a couple of weeks ago ahead of its April earnings report. When the market tanked mid April shares of MAR broke down under its trendline of support and its simple 50-dma and its 100-dma. The market's recent oversold bounce helped lift MAR just high enough to retest the $66.00 level (and its 40 and 50-dma's) as new resistance. Now MAR is turning lower on big volume nearly double the norm. Short-term technical oscillators are turning bearish. This looks like an opportunity to capture a quick decline toward the $60.00-58.00 range. The $60.00 level is likely to be round-number support while the $58 level should be supported by its simple 200-dma.
BUY PUT JUN 65.00 MAR-RM OI= 175 current ask $3.30
Picked on April 28 at $ 63.37
PACCAR Inc - PCAR - close: 67.90 change: +1.09 stop: 70.01
The action in PCAR on Friday appears to be nothing more than an oversold bounce. Shares are still in a two-month bearish trend. Any bounce back toward the $69.00 level and its exponential 200-dma can be used as a new bearish entry point although we'd wait to see that the rally was indeed failing before initiating positions. The P&F chart remains bearish with its $54 target. Our target is the $62.50-62.00 range.
BUY PUT JUN 70.00 PAQ-RN OI= 37 current ask $4.10
Picked on April 27 at $ 66.45
Parker Hannifin - PH - close: 59.94 change: +0.86 stop: 62.01
PH is a new bearish candidate from the Thursday night newsletter. While shares did bounce on Friday there is no change to our strategy. Look for a failed rally near $61.00-61.50 as a new bearish entry point. A reprint of Thursday's play description follows:
It looks like shares of PH have been in trouble ever since the stock lost its upward momentum back in December 2004. There was a sharp drop in mid January as investors reacted to the company's earnings report where PH missed earnings estimates. The stock managed to rebound somewhat through February-March only to find resistance near $70.00. In late March PH crashed again after issuing an earnings warning. Ever since shares of PH have been pinned under resistance near $62.00. Now with the major market averages on the verge of breaking down yet again we suspect this could be an attractive entry point for put positions in PH. Technical traders will note that PH's MACD is nearing a new sell signal and its RSI and stochastics are turning bearish again too. Plus, the stock's P&F chart is in a sell signal with a $44 target. Our target is the $55.00-54.00 region. More conservative traders may want to wait for a little confirmation and only initiate new plays on a decline below the $58.00 level.
BUY PUT JUN 60.00 PH-RL OI= 52 current ask $2.45
Picked on April 28 at $ 59.08